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Is the New Overtime Rule a Problem for Your Practice

Written on August 24, 2016

The Department of Labor recently announced a new minimum required salary for employees who are considered exempt from overtime pay. The change is effective on December 1, 2016 but it should only apply to a small number of employed individuals in a medical practice. The key word to this change is in the word “exempt”. Exempt status is a classification given to certain staff who spend more than 50% of their time managing at least two other full-time employees, among other requirements. For a professional or executive exemption to apply, the employee’s administrative job duties must meet a rigorous set of criteria. It is important to evaluate your management and professional staff whom you have classified as exempt. Do they earn more than $913 per week or $47,476 per year? If not, you will need to pay them overtime for any hours they work over 40 hours. You can re-classify them to an hourly status to keep the hourly rate reasonable to the current salary rate but they will still qualify for overtime payment.

Our team in the Healthcare Division of Warren Averett generally sees the manager of a small practice meet the exempt status. In a large practice, it could be the entire management team but not usually team leaders or supervisors. We recently counseled a practice who was paying an employed physician overtime when they worked more hours than contracted. Physicians and mid-level providers are professionals and do not meet the requirements for overtime payment. If a physician or other provider is compensated on an hourly service basis, they should only be paid for the hours worked using the agreed upon rate. An hourly employee should not be classified as exempt to avoid paying overtime. Any full-time employee who does not meet managerial or professional status should be considered hourly and they should record their time in order to be compensated accurately. Overtime should be paid if any full-time hourly employee works more than 40 hours in a work week. I’ve had managers who wanted to work in excess prior to a physician vacation and then give the staff time off the next week to offset the overtime when they have no patients. This scenario is not possible unless your weekly payroll cycle runs from mid-week to mid-week, and your staff do not work more than 40 hours within your normal payroll week.

Small practices may pay staff on a salary basis to ease the payroll process which would set the salary based on the office operating hours whether the staff member worked the full number of hours or not.

Practices that want this process in place believe tracking employee time is too time consuming for the manager or it is too minimal to be concerned. It is possible to pay salary for convenience as long as there is a valid timekeeping process to identify the need for overtime payment. It is always important to have a timeclock that keeps accurate arrival, break, and departure times. It is essential when preparing disciplinary action and termination to have an official record of the employee service. A complaint from an employee will bring the Department of Labor to investigate and the first item they will request is the official record, if there is no record, they will take the word of the employee.

The new overtime minimum focuses on exempt status employees only. We expect this change to mostly affect industries whose managers cover multiple shifts but earn a lower salary. We provide payroll resources to our clients and often advise when we see excessive overtime. We can assess whether your staffing is reasonable for the volume of work or if your processes could be streamlined to save staff time. Our team is available to answer our questions regarding overtime rules and exempt status.

Tammie W., CMPE, CPC

Tammie Lunceford serves Warren Averett as a dental and healthcare consultant. She obtained her Bachelor of Science in Health Administration from UAB in 1995. Tammie is a Certified Professional Coder, CPC and registered with the American Society of Pathology as a medical laboratory technician, collectively bringing her clinical and administrative experience to more than 25 years. She has served in an Administrator or Director role in multiple specialties, with health systems, private practice, and medical management organizations. Tammie serves medical and dental practices by evaluating scheduling, patient flow, operational efficiencies, revenue cycle management, and EMR selection process and planning. In addition, she is knowledgeable with evaluating staff structure and compensation.